Risk Update

Disqualification News: Unwaivable Cannabis Conflicts + Conflicts Appealed

Cozen O’Connor DQ’d Over Client Conflict In Cannabis Deal” —

  • “An Illinois state judge has disqualified Cozen O’Connor from representing a woman who is seeking to block several individuals from selling their majority stake in a medical marijuana dispensary to an outside company, as the firm has previously advised a parent company in Pennsylvania.”
  • “Because Cozen O’Connor PC has represented Jushi Inc. in connection to proposed transactions involving medical marijuana dispensaries in Pennsylvania, the firm cannot also represent Tanya Griffin, who is seeking to block the sale of the majority stake in TGS Illinois Holdings LLC to Frond Holdings LLC, according to an order on Monday by Judge Raymond W. Mitchell.”
  • “Griffin pointed to a conflict of interest waiver provision included in the engagement letter involving Cozen O’Connor and Jushi, arguing that the firm could represent her in the present case. She also asserted that Frond and Jushi are separate entities, and that the firm has never represented Frond, according to the order.”
  • “But Judge Mitchell noted that Jushi’s CEO is also Frond’s manager, and that Frond was created by Jushi to finalize the transaction involving TGS. The judge also emphasized that the language in the provision is insufficient to establish that Jushi had signed off on the firm potentially initiating litigation against it, according to Monday’s order.”

And Bill Freivogel notes a few disqualifications reverse on appeal:

  • “Sarkis v. Angels Gun Club, 2019 WL 2754767 (Cal. App. Unpub. July 2, 2019). Gun Club is a “nonprofit mutual benefit corporation” with 17 directors. Gun Club expelled Sarkis as a member. Sarkis, in turn, sued Gun Club and Director No. 1 directly for unlawful expulsion (“Direct Action”). Law Firm appeared for both defendants in the Direct Action. Sarkis then filed a derivative action against Gun Club and most of the board members, including Director No. 1 (“Derivative Action”). In the Derivative Action Law Firm appeared for Gun Club only, and another firm appeared for the director defendants (including Director No. 1). Sarkis moved to disqualify Law Firm in both actions. The trial court granted both motions. In this opinion the appellate court reversed as to the Direct Action, holding that Sarkis had no standing to bring the motion. As to the Derivative Action, the appellate court affirmed the trial court, holding that Law Firm should be disqualified. Put simply – perhaps too simply – the court could not see how Law Firm could look out for the interests of Gun Club in the Derivative Action when it was representing Director No. 1 as a defendant in the Direct Action. [Our note: This opinion contains an extensive discussion of conflicts in derivative actions. And, while we do not know enough to know whether the discussion is correct on all points, we are puzzled why it was deemed “Not to Be Published.”]”
  • “Goff v. Goff, 2019 WL 2607258 (Fla. App. June 26, 2019). Post-dissolution proceeding. W moved to disqualify H’s lawyer (“Lawyer”). Lawyer has known H since H was a child. Lawyer also became a friend to W after H and W married. Lawyer represented W once, in a dispute with W’s sister. The trial court granted the motion to disqualify. In this opinion the appellate court reversed. First, the court held that W’s dispute with her sister was not related to this post-dissolution proceeding. Second, the court noted that W’s financial affairs were fully disclosed in the dissolution proceedings, so nothing W might have disclosed to Lawyer earlier remained confidential.”